Craft spirits' recipe for success: craft beer

Bill Rogers, founder of Liberty Call Distilling and San Diego Distillers Guild president: "We are betting that people who like craft beer will want to drink craft spirits."

Bill Rogers, founder of Liberty Call Distilling and San Diego Distillers Guild president: "We are betting that people who like craft beer will want to drink craft spirits." (K.C. Alfred/The San Diego Union-Tribune)

While not in the bottle, another ingredient provides the inspiration: beer.

San Diego County’s emerging craft spirits industry is cribbing from the craft beer playbook. The San Diego Distillers Guild is modeled on the San Diego Brewers Guild. Like the brewers, the distillers stress their status as independent, small-batch producers and have adopted craft beer’s all-for-one ethos, stressing collaboration rather than competition.

“Craft distilling across the country and here in San Diego — probably even more so — is absolutely on the same trajectory as craft beer,” said Laura Johnson, You & Yours’ founder and distiller.

There are some key differences between the two groups, starting with their respective products’ potency. “You can drink a lot of beer,” said Johnson, whose Sunday Gin is 80 proof or 40 percent alcohol. “You are not going to drink spirits the same way.”

This week marks the 29th anniversary of the county’s oldest brewery. Since the original Karl Strauss brewpub opened in 1989, craft beer has become a runaway success — more than 160 local breweries now provide more than 1 million barrels of beer a year, with an economic impact equal to two San Diego Zoos.

San Diego’s craft distillers are trying to follow an equally profitable path.

“The target audience is similar,” said Bill Rogers, owner of Liberty Call Spirits in Spring Valley. “We are betting that people who like craft beer will want to drink craft spirits.”

Flowing from breweries

Early one morning last September, an electrical fire erupted in the cramped, garage-like Spring Valley offices of San Diego Distillery. Before it was extinguished, the blazed had caused $300,000 in damage and destroyed the still.

Co-owner Trent Tilton’s reaction? “No harm, no foul,” he said.

Tilton and his wife and business partner, Maria Tilton, could afford to take this setback in stride. Already planning to move to larger quarters, they had ordered a new, more capable still. They also were buoyed by their fellow Distillers Guild members.

“Every single distillery in San Diego reached out and was willing to help out in every way that we needed,” Trent Tilton said. “Every single one either texted or called and said, ‘Hey, if you need anything don’t hesitate to reach out.’”

Established in 2014, the Distillers Guild was designed to assist all members, in good times and bad. “Yuseff Cherney put it together,” said Rogers, the guild’s current president. “He was talking about the Brewers Guild and how it helped the entire industry.”

Cherney, a co-founder of Ballast Point, opened a small distillery at that brewery in 2008. While he had few San Diego peers in spirits then, liquor was already flowing from out-of-town breweries — San Francisco’s Anchor, for instance, had been distilling since the 1990s.

In 2013, distilleries opened at two more local breweries, BNS and Twisted Manzanita, both in Santee. After Constellation Brands bought Ballast Point in 2015, Cherney left the brewery to launch a new, independent distillery, Cutwater.

Located in Miramar, Cutwater is the county’s largest distillery. The 50,000-square-foot complex includes bottling and canning lines, a copper bourbon still, a stainless steel gin still, two 6,000-gallon oak fermentation tanks, and a 260-seat restaurant and bar.

At last September’s San Francisco World Spirits Competition, Cutwater won 17 medals, including gold for its canned Bloody Mary with Fugu Vodka, as well as its bottled Devil’s Share Single Malt Whiskey and Barrel Rested Old Grove Gin.

These command high prices — 750ml of that single malt will set you back $90 — just as craft beer costs more than Budweiser, Coors and other beers from large conglomerates. In both craft beer and craft spirits, proprietors say that consumers will pay more for a high-quality, more flavorful product.

“We use food-grade corn and brewery’s barley,” Cherney said.”Both are higher-end than usual.”

A bottle of Malahat’s Rye Whiskey costs more than twice as much as a bottle of Bulleit Rye, more than triple a bottle of Jim Beam Rye. But that rye from Miramar’s Malahat took a gold medal at the same San Francisco competition where Cutwater triumphed.

“We want to make sure we use natural ingredients,” said Ken Lee, Malahat’s co-founder. “By bringing out the real ingredients, the true ingredients, it completely changes the flavor.”

New frontier?

When the Distillers Guild was founded, it had five members. There are 13 today and more on the way.

“By the end of the year,” Rogers predicted, “we should have 20.”

Local distilleries benefit the nation’s growing thirst for hard liquor. Beer remains more popular, with 47 percent of the nation’s alcoholic beverage sales, but its share is slipping. Sales of spirits rose 4.5 percent last year, rising to a total share of 35.9 percent. (Wine was in third place, at 17.1 percent.)

Changes in state and federal laws also fuel this boozy renaissance. Since Jan. 1, 2017, craft distilleries — again, like craft breweries — have been allowed to operate tasting rooms.

“The tasting room here pays our rent,” Rogers said.

Without its spacious tasting room, You & Yours may have been Dead & Done. “Distributors don’t want to pick you up if you don’t have existing accounts,” founder and distiller Laura Johnson said. “And you can’t get accounts if you don’t have a distributor.”

Within 10 months, though, her popular tasting room landed her on Forbes’ “30 Under 30” list for 2018. It also led distributors to her East Village doorstep. You & Yours gin and vodka now are found in sold like Lazy Acres and Bristol Farms, l iquor stores like Keg ’N Bottle, and dozens of restaurants, including Urban Wood and Juniper & Ivy.

Congress’ recent tax plan means that Washington now levies a per-bottle charge of 43.5 cents, down from $2.14. “That extra buck eighty a bottle is helping people expand,” Rogers said.

Liberty Call is planning a distillery, restaurant and bar in Barrio Logan, a major expansion made possible in part by making whiskey for an Ohio company that sells it under the Freedom Bourbon label. Among craft brewers, this is known as contract brewing.

At Liberty Call, it’s known as good business. “At this point,” Rogers said, “we don’t enough volume to keep up.”

San Diego’s craft distillers owe all this success — well, some of it, at least — to beer.

“We are fortunate to have, and grateful to have, the rich foundation that craft beer established here in San Diego,” You & Yours’ Johnson said. “San Diegans love craft beer culture, they love local products, they are very loyal — and this is a whole new frontier for those people."